HMRC clarifies its position on the interaction between salary sacrifice and auto-enrolment

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Pension obligations on employers in relation to auto-enrolment are being introduced, on a phased basis, from October 2012. One concern for employers about auto-enrolment relates to its interaction with HMRC rules on salary sacrifice.

‘Salary sacrifice’ occurs where an employee, with the agreement of their employer, ‘gives up’ part of their salary in return for a non-cash benefit (e.g. an employer’s pension contribution). This is advantageous from a tax perspective because the salary falls and so there are savings in national insurance contributions for both the employee and the employer…

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